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Regulation Versus Taxation

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  • Alberto F. Alesina
  • Francesco Passarelli

Abstract

We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are sufficiently convex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16413.

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Date of creation: Sep 2010
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Publication status: published as Alesina, Alberto & Passarelli, Francesco, 2014. "Regulation versus taxation," Journal of Public Economics, Elsevier, vol. 110(C), pages 147-156.
Handle: RePEc:nbr:nberwo:16413

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Citations

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Cited by:
  1. Di Giannatale, Paolo & Passarelli, Francesco, 2013. "Voting chances instead of voting weights," Mathematical Social Sciences, Elsevier, Elsevier, vol. 65(3), pages 164-173.
  2. Leonzio Rizzo & Alejandro Esteller - Moré, 2011. "US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition," Working Papers 201116, University of Ferrara, Department of Economics.
  3. Carlo Bollino & Silvia Micheli, 2012. "On the Relative Optimality of Environmental Policy Instruments: An Application of the Work of Alberto Alesina," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 40(4), pages 385-399, December.
  4. Masciandaro, Donato & Passarelli, Francesco, 2013. "Financial systemic risk: Taxation or regulation?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(2), pages 587-596.
  5. M. Gallastegui & M. González-Eguino & I. Galarraga, 2012. "Cost effectiveness of a combination of instruments for global warming: a quantitative approach for Spain," SERIEs, Spanish Economic Association, Spanish Economic Association, vol. 3(1), pages 111-132, March.
  6. Francesco Forte, 2012. "The New Macro Political Economy of Alberto Alesina," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 40(4), pages 417-428, December.

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